[Manic Monday] Why The Universal Music Purchase Of EMI May Turn Out To Be A Good Thing

The music industry was abuzz late last week regarding the approval from the European Commission and the US's Federal Trade Commssion, regarding the planned purchase of EMI's recording arm by the already-dominant Universal Music Group International. Many groups, including indie bands and indie labels, have stated opposition to the deal from the start, saying that Universal will have too much power in the market, and of course articles here and there have claimed that this is the day that the music died.

Now of course, the music won't die, but it may well as be that the music industry will suffer somewhat when one major label is more dominant over the other players, virtually all over the world. Naturally, a dominant company in any industry will try to retain its dominance and also attempt to negotiate favorable business terms with any music service (now, the digital music services) for them and probably not think of the general well-being of the industry in general.

Of course this is all most likely true, if indeed Universal is indeed that dominant all over the world. They probably are in most Western countries, but they're probably not as strong in markets where local music rule the roost, such as Indonesia. But does the EMI acquisition really spell doom for the industry? Time will tell. But there is another side to that story.

Behind closed doors, the music industry is a messy place. Industry level associations were founded initially not as a platform to negotiate industry-wide implications with other industries/companies, but to moderate conflicts between members. Music licensing is possibly a somewhat arcane science that sometimes confuses even the veterans, and in the early days, cross-copyright claims occurred in an alarming rate, similar to what is happening to patents today.

Publishers, music labels and collecting societies are often at odds with each other, and sometimes even hold up whole businesses from moving forward due to disagreements on who gets how much money. Music licensing, even before digital, was always a complicated affair and lawsuits between musicians, composers, artistes, music labels, publishers and so on are not uncommon. So when digital possibilities abound, industry structures, copyright conventions and gentleman agreements go awry.

A dominant player could change all that. The decidedly negative issue of Universal Music more or less imposing technological standards and trade agreement levels onto the market may turn out to be something good. The seemingly endless negotiations and haggling that always occur at the beginning of new business deals may be cut short, and Universal may use its market dominance to just say yes or say no, or even go off and do something by themselves instead.

I'm willing to bet on that last part - the sheer amount of catalogue will enable Universal to conduct business experiments (otherwise known as startups) to see what new business models they can introduce to the music industry, and just do it, instead of waiting for an entire industry to decide whether they want to do it or not.

Once one of these experiments reach market feasibility, they'd have no choice but to open up the service to other labels to keep it relevant to the market. This would be the equivalent of one large label agreeing to sign on for ringbacktone services and defining the price and business structure for eventually the whole industry.

Such power is certainly prone to temptation - most shareholder-value driven companies will always try to maintain any market leadership position to retain share price growth as opposed to constructing something healthy for the industry in general - and it is logical for people to oppose Universal's increased dominance. But keep in mind, Universal (and their parent company Vivendi), are also the guys behind Activision (who created 'Guitar Hero'), own All The Worlds event organizing (responsible for events like, among others, Singfest and F1 Rocks), and have been at the forefront of experimenting with cross-industry combined music offerings since the early 2000's, like Universal Mobile MVNO in France (not the one in Malaysia), So Music credit card with Societie Generale in France, and also owns Bravado, the world's largest music merchandising company.

In industries in need of dire change, it may just need a dominant player to challenge initial preconceptions about the industry and push forward with new innovations that will eventually be emulated (or even blatantly copied) by other players in the market.

Disclosure: I previously worked with Universal Music.

Ario is a co-founder of Ohd.io, an Indonesian music streaming service. He worked in the digital music industry in Indonesia from 2003 to 2010, and recently worked in the movie and TV industry in Vietnam. Keep up with him on Twitter at @barijoe or his blog onhttp://barijoe.wordpress.com.

[Image from Flickr/freeloosedirt]